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How Do Marketers Divide Their Markets?

Table of Contents

Marketers can use four types of market segmentation:

  1. Demographic Segmentation

  2. Psychographic Segmentation

  3. Behavioral Segmentation

  4. Geographic Segmentation

Gone are the days of your team spinning its wheels trying to come up with something that will stick. By segmenting your customers correctly, you’ll get it right every single time.

Rather than trying to direct marketing activities toward the whole market, marketers plan their activities for specific, well-defined groups of consumers.

They tailor their product, price, place, and promotion activities to the segments with which they wish to work

What Is Market Segmentation?

Market segmentation is a business practice that brands use to divide their target market into smaller, more manageable groups of people based on common ground they share to optimize their marketing, advertising, and sales efforts.

These groups may have common demographics (age, gender, etc.), geographic location, attitudes, behaviors, or similar characteristics.

A consumer may belong to multiple market segments.

Customers of each market segment have similar characteristics that businesses can leverage to advance their efforts.

Market segmentation is developed based on one of two strategies and several consumer identifying characteristics like demographics and behavior.

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Why Is Market Segmentation Important?

Mass marketing makes your audience grow and broadens your audience’s preferences, needs, and opinions, putting your marketing message at risk of being irrelevant to the majority of people you’re trying to reach.

This is exactly why segmenting your target market is crucial.

Market segmentation can help you discover new ways to reach your current customers and help you find new markets of potential customers that you haven’t previously reached.

The purpose of market segmentation is to introduce a tailored message that will be received successfully.

This practice allows you to focus your marketing efforts on individual customer segments to better cater to their specific wants and needs.

The objective is to sell more products, to more people, more often.

The problem is not competition; the problem is acknowledging that people within markets are different and that successful marketers must respond to these differences.

Marketing campaigns help group characteristics potential clients share rather than classify them individually.

Market segmentation depends on assuming that all the potential customers do not behave identically.

Therefore, the industry should address their requirements by making appropriate marketing strategies and adapting them subsequently.

The marketers bifurcate or split the market on certain bases.

According to research, over 30,000 new products are launched each year, and 95% of them fail.

By identifying a target market, isolating their problems, and creating a product that solves those problems, marketers have a higher probability of success over companies that don’t target groups.

What's A Target Market?

A target market can be described as the group of customers the business seeks to attract.

Though a target market may seem to be a sample of the market, it is the particular group of customers the business seeks to attract.

Knowing the market’s direction is helpful to any marketer.

Targeting in marketing keeps your messaging and marketing objectives on track.

It helps you identify new marketing opportunities and avoid distractions that lead you away from your target market.

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The Four Types Of Market Segmentation

There are many types of market segmentation. Below are the four main methods of market segmentation.

Market segmentation will emphasize the geographic segment markets (e.g., metro areas, DMAs, states, regions, countries).

Consumer segmentation is used to find out the behaviors and attitudes of those groups. Customer segmentation divides the existing customer base into separate groups.

While the methods for study design, data collection, and analysis are similar, they focus on different aspects of segmentation.

You can also create more niche segments within the types below.

Using different types of market segmentation allows you to target customers based on unique characteristics, create more effective marketing campaigns, and find opportunities in your market.

Marketers use different segmentation strategies depending on their goals. Market segmentation aims to identify a target market or group of people.

Demographic Segmentation

In this segmentation, the marketers divide the consumers into groups based on several factors such as gender, age groups, family size, religion, socio-economic status, etc.

Sometimes, marital status is also considered to define strategy in marketing planning.

The tourism industry would not offer similar holiday packages for a bachelor’s and a married couple or family.

Demographic segmentation variables are among the most popular bases for segmenting customer groups because customer wants are closely linked to variables such as income and age.

There is a plethora of demographic data available.

Because demographic information is statistical and factual, it is usually relatively easy to uncover using various sites for market research.

Businesses perform market research to create market segments that include multiple variables.

Their challenge is to find potential customers, known as their target market, that combine shared factors, making them the most likely group to buy their products and services.

Think H&M, Old Navy, and Zara. These companies cater to men, women, and children of all ages, and they have distinct labels, advertising, and styles for each segment.

Psychographic Segmentation

Unlike geographic and demographic segmentation, psychographic segmentation focuses on your target customer’s intrinsic traits.

Psychographic traits can range from values, personalities, interests, attitudes, conscious and subconscious motivators, lifestyles, opinions, etc.

Psychographics give you insight into why people decide to purchase or not purchase your product, click on or ignore your ad and otherwise interact with you.

Say you’re a furniture and home decor company, and you have a market segment consisting of newlyweds in their 20s and 30s with a household income above $60,000.

Some members of this segment are converting, while others are not.

When you add psychographic information into the mix, you may find that people that purchase your products often value community and friendships and are environmentally conscious.

Companies are aware that many consumers want to be in higher-income groups and behave like they are already part of them.

Mercedes Benz’s cheaper line of “C” class vehicles is designed to appeal to these consumers. Gender is another way to segment consumers.

Men and women have different needs and also shop differently. Consequently, the two groups are often, but not always, segmented and targeted differently.

Starbucks does a fantastic job of segmenting its customers based on psychographic traits.

We all know that not everyone loves coffee or prefers to drink it, but that doesn’t stop Starbucks from appealing to everyone.

To understand your target audience on this level, methods such as focus groups, surveys, interviews, audience testing, and case studies can prove successful in compiling this type of conclusion.

Behavioral Segmentation

In this segmentation process, the marketers consider an individual’s knowledge and attitude about a product or service’s usage and the benefits sought.

Attitudes towards your brand, how they use and interact with it, and their knowledge base are all examples of behavioral segmentation.

Collecting this type of data is similar to the way you would find psychographic data. Brand loyalty is an excellent example of behavioral segmentation.

When you look at your audience data, you might discover interests that you didn’t realize your customers had.

For example, a company might make most of its sales in physical stores.

Marketers work hard to get customers to love and stay loyal to their brand for a consistent purchase cycle.

Other examples include purchasing habits, spending habits, user status, and brand interactions.

To target customers with great brand loyalty, many companies will offer rewards programs to enhance this behavior with the hope of capturing new loyal customers.

For example, the makeup and beauty company, Sephora, has an excellent rewards program for its loyal customers.

While reading this article, I bet you can think of one brand you consistently purchase and trust enough to buy its newly launched product without even reading the reviews.

When marketers know why consumers or businesses buy their products, they can make it part of their marketing strategy to address those behaviors.

Geographic Segmentation

This simplest method of market segmentation depends on the geographical location of customers.

It means that the purchasing habit of one location differs from another location or country.

The location significantly influences buying habits that marketers can use to develop their marketing.

Marketers use various geographic segmentation variables, including the country, region, state, province, town, climate zone, or zip code.

For instance, lifestyle products or branded apparels have high demand in metro cities rather than small towns and rural areas.

Marketers use geographic segmentation to determine the placing of certain products.

For example, a clothing store will sell its heavy, warm clothes in cold climates and lightweight, thinner clothing in warmer climates.

Companies can also decide which stores to pitch their products to based on where their market segment shops. Their customers may, for example, shop at luxury boutiques or bargain outlets.

You can also identify consumers based on the characteristics of the area they live in, such as its climate, the population density, and whether it’s urban, suburban, or rural.

Looking at geographic data can also help a company decide where to set up a new store.

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Firmographic Segmentation

Business-to-business (B2B) companies may use firmographic segmentation to divide up the businesses in a market.

This is similar to demographic segmentation with individual consumers but instead looks at the characteristics of companies that may become customers.

What Are The Benefits of Market Segmentation?

There are a few main benefits that come with segmenting your market.

Stronger Marketing Messages

You can develop stronger marketing messages when you know whom you’re talking to. You can avoid generic, vague language that speaks to a broad audience.

Instead, you can use direct messaging that speaks to your target audience’s needs, wants, and unique characteristics.

Marketers now collect vast amounts of data on their target audience to ensure their marketing messages appeal to the right customer, at the right time, for the right products.

Surveys are a great way to test marketing messages to see if they resonate with the target audience.

They start by creating a hypothesis about how they think their survey respondents will react. The survey results help them build better messages and more successful campaigns.

Hyper-Targeted Ads

You can target audiences by their age, location, purchasing habits, interests, and more on digital ad services.

When you use market segmentation to define your target audience, you know these detailed characteristics and can use them to create more effective, targeted digital ad campaigns.

Targets The Ideal Customers

Targeting a segment that is likely to be interested in your content or product is much more effective than targeting an overly broad audience.

If you advertise to an entire market, you will spend a massive amount of money on ads, but a relatively small percentage will convert.

If you instead direct your marketing to a segment with the right characteristics, you can considerably increase your campaign’s conversion rate.

Ask your target market the questions related to the segmentation categories you chose. You should get to know your target market through and through at this step.

You can use surveys, focus groups, polls, and more to obtain your answers. Make sure you’re asking questions that will provide quantifiable solutions.

Market segmentation can also help businesses focus their efforts, enabling them to establish a brand identity and specialize in a particular type of product.

A brand that tries to appeal to everyone in their marketing will come off as generic and unmemorable.

It could also leave customers confused about what the brand stands for and what kind of company it represents.

In a recent survey of marketing professionals in North America, 62% of respondents said improving audience segmentation to enable more precisely targeted messaging was a top priority.

How You Can Create A Market Segmentation Strategy

Here are four steps that lay the process out simply. Once you’ve got these basics down and have a solid foundation for your strategy, branch out, and make it uniquely your own.

Utilize this segmentation process to understand your market and identify new market opportunities.

Analyze Your Existing Customers

If you have existing customers, start your market segmentation process by performing an audience analysis.

Depending on how well you’re segmenting a product and service segment, it is best to start with a market survey.

The audience analysis helps to know who is your customers’ current client base. Use this market research question for research purposes.

Interview the customer. Get in front of a customer and interview their prospective customers or prospects. Give answers to each category of segmentation.

Talk to a sales team member that spends a lot of time working with customers, and use them as a resource.

Interview them to find commonalities or trends they often see while working with your customers.

Refer to your business data. Your business likely has loads of data that can help you get to know your customers.

Use your customer relationship management tools and point-of-sale systems to find trends related to behavioral segmentation.

Pull data that shows how much customers spend, how often they visit your store, and the type of products and services they buy.

Ask salespeople about their products. Using the salespeople who work with clients is an effective resource for your organization.

Create A Buyer Persona For Your Ideal Customer

After completing your audience analysis, it will help you identify your current clients and prospects.

Use this data to develop a buyer persona that describes what type of client the company is seeking. A buyer’s personality can represent a fictional description of the target customer you want.

While it is relatively easy to identify segments of consumers, most firms do not have the capabilities or the need to effectively market their products to all segments that can be identified.

Rather, one or more target markets (segments) must be selected.

Knowing whom you want to work with will make finding the right market segment opportunities easier.

This lets you understand how your branding will attract people. Having someone to partner with will help you identify market segments for your business.

Identify Market Segment Opportunities

Although it’s hard to be all things to all people, many companies try to broaden their customer bases by appealing to multiple generations, so they don’t lose market share when demographics change.

Several companies have introduced lower-cost brands targeting Generation Xers, who have less spending power than boomers.

For example, kitchenware and home-furnishings company Williams-Sonoma opened the Elm Street chain, a less-pricey version of the Pottery Barn franchise.

You need buyer personas to describe the ideal buyer and start looking to find market segments to expand your product portfolio or service.

Market segments are opportunities that drive new marketing strategies or products. If you need help identifying these brands, ask a few simple questions.

Second, review your buyer personas for the potential market and ask questions that can identify opportunities.

Identify possible market segments and research to verify their feasibility and suitability.

Attract (And Convert) Quality Leads

When your marketing messages are clear, direct, and targeted, they attract the right people. You draw in ideal prospects and are more likely to convert potential customers into buyers.

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Differentiated Marketing

Once you’ve capitalized on your market and are seeing great success, consider tapping into other similar markets to continue to drive growth.

On the other hand, a differentiated marketing strategy is when a company focuses on two or more markets.

Companies that utilize this strategy market their products to many different segments; they just change their messaging to appeal to all of the differences.

Common Market Segmentation Mistakes

Now that you understand the basics of market segmentation and have seen it in practice, it’s time to focus on marketers’ common mistakes when segmenting their target market for the first time.

Creating Too Small Of Segments

Interpret the responses you received to create dynamic customer segments unique to your brand.

Make sure that you’re focusing on the buying power of the segments and not creating any that are too small.

This can be rather easy to do if you’re trying to ensure that you have every last detail included.

Testing The Strategy Too Late

Once you find a new market you want to explore, don’t go all in just yet. Create a few campaigns to test your idea.

Try new markets and track your results to see where you can find a sweet spot that resonates with audiences.

Small market tweaks can lead to big results, so continue to go through this process, test, and iterate based on what you learn.

Ensure that you have interpreted your responses accurately by testing them on your target market. Implement conversion tracking early.

It’s one of the best ways to determine the effectiveness of your strategy.

If you’re not relating your customers with the segments you’ve created, you’ll need to relook at your survey methods and analysis.

Not Standing Apart From The Competition

Be sure that the strategy you choose has unique characteristics from others in the marketplace so you can stand out.

By determining the proper strategy for your needs and following the basic steps outlined above, you can ensure that your market segmentation strategy will be effective and successful.

How Kennected Can Help

Knowing how to get a message across successfully will help your brand grow exponentially. Remember, your success won’t last long if you’re not constantly testing your strategy.

To be competitive, you must always be on top of your game. Market segmentation comes down to knowing your customer base and providing a personalized experience for them.

We can help you improve your audience’s understanding to enable enhanced content personalization and ad targeting.

Using LinkedIn’s #1 lead generation tool Cloud Kennect, you can make the market segmentation process easy as snapping your fingers.

Using the best in automation, Cloud Kennect uses LinkedIn to allow the user to differentiate leads by different types of market segmentation, giving users the chance to make their marketing strategy personal to their individual goals.

As you learn more about your audience and tailor your messaging, content, and strategies to your customers’ and prospects’ needs, you can boost engagement, sales, and customer satisfaction.

To learn more about our solutions and how we can help you get to know your audience better, contact us today at Kennected.

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